Digital media and marketing software firm Adobe isn't likely to reap the rewards of its investments in generative artificial intelligence until late this year and early next, a Wall Street analyst said. Adobe stock fell on Wednesday.
Jefferies analyst Brent Thill reiterated his buy rating on Adobe stock with a price target of 700 after the company held an analyst briefing on Tuesday. The briefing took place at the Adobe Summit conference in Las Vegas.
Adobe stock investors will need patience, Thill said in a client note Wednesday. That's because material monetization of Adobe's generative AI innovations is unlikely until late 2024 and into 2025, he said.
"Investors remain negative as they wait for revenue acceleration that matches the AI buzz," Thill said. "Adobe's focus remains on driving usage and adoption, with significant monetization to happen later after a significant base has been built."
Adobe Nears Inflection Point With AI
In an interview with Investor's Business Daily, Adobe Chief Financial Officer Dan Durn said the company is nearing an inflection point.
With its latest product announcements at Adobe Summit, the company has created end-to-end workflows around content creation, marketing and analytics, Durn said.
"We're a leader in delivering and monetizing AI. And that's permeating all three of our clouds," Durn said. The company's cloud software offerings include Creative Cloud, Experience Cloud and Document Cloud.
Plus, it has more generative AI innovations in the pipeline, Durn said. Soon Adobe will offer video, audio and 3D model creation tools, he said. They will join its photo, illustration and text creation tools.
Adobe Stock Called A 'Top Pick'
Mizuho Securities analyst Gregg Moskowitz on Wednesday kept his buy rating on Adobe stock with a price target of 680. Adobe stock is one of his "top picks" over the next 12 months.
On the stock market today, Adobe stock slid 0.6% to close at 504.40.
"Adobe is driving AI monetization across many products and in various ways encompassing price, quantity, and higher value being delivered," Moskowitz said in a client note. "Yes, it is still early days. But in our view, the breadth of Adobe's AI monetization is being underappreciated by the Street."
Adobe stock is down since the company delivered fiscal first quarter results and guidance on March 14.
Investors Cautious On Adobe
Oppenheimer analyst Brian Schwartz said investors are leery about the company since its Q1 report.
"Adobe offers an attractive risk/reward at current levels, but is also a 'show-me' stock until investors can gain comfort in future earnings reports that pricing headwinds in the Creative Cloud business, rather than competition, are restraining the segment's bookings growth," he said in a client note.
Schwartz rates Adobe stock as outperform with a price target of 660.
Adobe has taken a differentiated approach to generative AI vs. rivals, Durn said. That approach is focused on product safety and customization.
"We've got proprietary data and we've got the rights to use that data," he said. "We're not just scraping things (off the internet) in a way that infringes off the IP (intellectual property) of others."
He added, "Enterprises can take comfort in that data and IP friendly approach. Our models are designed to be commercially safe."
Plus, Adobe is allowing customers to incorporate their own branded products, images and logos into its generative AI systems, Durn said. That will allow customers to create materials using their libraries of content.
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